The United States Court of Federal Claims will rule on Income Tax legitimacy

MAEHR v. U.S.

No. 17-1000 T.

"CONCLUSION.

For these reasons, the court grants the Government's November 21, 2017 Motion To Dismiss. See RCFC 12(b)(1). All other pending motions are moot. Accordingly, the Clerk of the United States Court of Federal Claims is directed to enter judgment on behalf of the Government.

IT IS SO ORDERED." - April 30, 2018.

 

Posted on 2018/07/29

Betty Boop: After the Fed, End the IRS? A Citizen Reports on John Maehr Case of Colorado Fighting the Legitimacy of the Income Tax

https://phibetaiota.net/2018/07/betty-boop-after-the-fed-end-the-irs-a-citizen-reports-on-john-maehr-case-of-colorado-fighting-the-legitimacy-of-the-income-tax/

Alert Reader sends:

“Truth is a lonely warrior.” (Perloff)

A long, solitary battle against the IRS for almost 20 years.  Jeffrey Maehr from Colorado has been fighting the IRS on the legitimacy of income tax.  Pro se.  His battle has been based on the Constitution and tax codes, inconsistencies, and lack of “meeting of the mind” on the part of the people kept in the dark and legalese jargon.


“Frivolous” has been thrown around in multiple courts for 17 years, Maehr’s case never went before a jury, he’s never been jailed and not ONE Appeals court has been willing to issue a ruling against him.  His case has always been remanded back to the lower court.  The IRS never dared take him to trial for fear that it would open jurors’ mind and, as a result, get so much publicity as to open sheeples’ minds.  As far as my research goes, “vexatious” was never used by any court in his case.  Which means that he was never held in contempt nor fined.

See especially Jeffrey T. Maehr v. Internal Revenue Service.

Anna Von Reitz wrote about his case and misses a lot on ramifications. 
http://www.oom2.com/t6451-major-supreme-ct-lawsuit-against-commissioner-of-irs-and-the-1st-and-2nd-in-command-at-irs-resign
If 911 is ever investigated (and thank you for pounding on it day in, day out), the entire US of A soul-searching will be so profound that lie will never again play a part in the human experience.  Not because of AI but because of consciousness.  If 911 is ever investigated, the entire foundation of the Western world will have to be reinvestigated from scratch.  Possibly the entire history of humanity as a whole.

And then… it’s back to “Who are we? Where do we come from? Why does the Vatican holds so much of our history? Why can’t we know it? Under whose authority? Chosen by whom? ”

The push for technology to cure humans artificial amnesia can only fail.  Nothing can be created without a solid foundation of truth.  Truth is the one thing humans have been deprived of.

We’re ready for it.  It’s seeping from everywhere.

Phi Beta Iota: The higher courts are not actually supporting the plaintiff.  The matter of the IRS is going to have to be settled by a President with the brains and the balls to lead America toward a Constitutional Convention, and the integrity to recognize that the federal government is an administrative service of common concern that should be funded by the states on an allocation basis contingent on a balanced budget approved by the States (i.e. the Senators acting for the States after the 17th Amendment is over-turned), and no borrowing allowed — no wars without a public agreement to raise funds for that war.
See Especially:
MAEHR v. U.S., 30 April 2018

Treasury confirms taxes are not needed to fund government spending

The magic money tree is real: Treasury confirms taxes are not needed to fund government spending

https://www.commonspace.scot/articles/13079/magic-money-tree-real-treasury-confirms-taxes-are-not-needed-fund-government-spending

Richard Murphy: “What we actually have here is…an admission that the government can create money at will. So the 'magic money tree' exists, as a matter of fact.”

A LETTER from the Economic Secretary of the Treasury has confirmed that the government does not need to raise money from taxation to fund government spending, leading to advocates of increased public investment to declare “the magic money tree exists, as a matter of fact”.

‘The Magic Money Tree’  is a phrase used to justify austerity and to criticise policies which seek to increase public spending. It was widely used by Conservative politicians, including Prime Minister Theresa May, during the 2016 General Election to counter the Labour Party’s manifesto commitments, which included plans for a £500bn increase in capital investment from the public sector.
The argument goes that the government can only spend what it has raised in taxation, with any additional financing having to be raised through debt from financial markets which subsequently has to be repaid. Former Prime Minister Margaret Thatcher famously said “The government has no money of its own. It’s all your money.”
But Treasury secretary John Glen’s 18 July reply to Peter May, a Modern Monetary Theory (MMT) advocate who had written to his MP Ben Bradshaw last year to inquire of the Chancellor as to where money came from, was in contrast to Thatcher’s position.

Glen answered: “While it is theoretically possible for monetary authorities to finance fiscal deficits through the creation of money, allowing governments to increase spending or reduce taxation, without raising corresponding financing from the private sector, there is a risk that money financing could rapidly undermine the stability of inflation expectations.”

The ability of government’s to create new money and spend it into the economy has received increased attention since the policy of quantitative easing (QE) was introduced in 2010 by the Bank of England. QE has seen £375 billion of new money created to buy up government bonds from commercial banks, increasing bank liquidity with the stated purpose of stimulating economic activity, but which the BoE accepts has had the effect of generating rising wealthy inequality and re-inflating asset bubbles.

In total, over $12 trillion of new money has been created in in the global economy since 2010 through QE.

Tax economist professor Richard Murphy, who has popularised the idea of People’s QE, where new government money creation is used on public investment projects to boost the non-financial economy which has laboured under austerity, welcomed the Treasury’s “admission” on his blog.

“This is important,” he said. “What we actually have here is…an admission that the government can create money at will. So the 'magic money tree' exists, as a matter of fact.”

The emphasis in Glen’s letter on preventing runaway inflation as an argument against increased spending through new money creation was picked up on by Murphy, who said the Treasury does not appear to have recognised (or been willing to state) that such excessive inflation can be reined in through tax policy, which he argues is its real purpose, rather than to finance government spending.
“What we have not got is an admission on the role of tax in this equation,” Murphy said. “What that suggests is that the role of tax in controlling inflation has to be the next argument brought to the Treasury's attention.”

REPORT: A Scottish Tax System – Imagining the Future

Murphy, a professor at City of London university specialising in taxation, advocated similar ideas in a paper for the Common Weal think-tank on tax policy in an independent Scotland.
In the paper, Murphy argues for an entirely new approach to fiscal policy based on ‘spend then tax’, rather than the traditional concept of tax then spend, which as long as an independent Scotland had its own currency would allow the government to utilise its monetary power to maximise the resources of the Scottish economy and labour force, with the only restriction being its ability to rein in inflation using tax policy.
Explaining the importance of the spend then tax approach to the independence project, Murphy wrote: “What it demands is that Scotland must have its own currency from the day it becomes independent. This is, of course, the sovereign right of any state. But it is not just a right: it is only by exercising this right that Scotland can be truly independent of any other country”
He continues: “If a country has its own currency then there is technically no limit to what a government can achieve. There are, however, two practical constraints. The first is that the government does not try to create more economic activity than the economy can deliver. To put that another way, they must not try to create more than full employment because that is not possible. And the second is that they must tax sufficiently to cancel enough of the money that the government has created through its spending to ensure that its inflation targets are met.”

READ MORE: Australian economist reviews Growth Commission: ‘Not conducive to the creation of a vibrant, progressive nation’

The City of London Professor was sharply critical of the SNP’s Growth Commission report on the economics of independence published at the end of May, which emphasised tight fiscal constraints which Murphy and others have described as an austerity policy, and advocated use of pound Sterling outwith a formal arrangement with the Bank of England for at least 10 years. He described the report as a “disaster” for the independence project.
Murphy, former SNP MP and economist George Kerevan and Australian economist Bill Mitchell have all argued that the Commission pays little attention to the effect its policy of fiscal consolidation will have on increasing deficits in the private sector, with the potential for both increased consumer and business saving rather than investment (reducing economic activity) and increases in the level of the private debt burden. Private debt in the UK is over 160 per cent of GDP and rising, significantly higher than the prospective public debt of an independent Scotland. As economist Jo Mitchell has found analysing UK Government austerity, “for every £2 billion in public sector deficit reduction, the annual rate at which households have taken on new debt has increased by £1 billion”.
Knowledge of how money created is low, including among the UK’s political class. A survey by Positive Money before the 2017 General Election found that 85 per cent of MPs were unaware that commercial banks created new money every time they issued a loan, while 70 per cent believed only the government had the power to issue new money, despite over 97 per cent of money being created by private banks. MPs have never debated the BoE’s QE policy in the House of Commons.
Picture courtesy of Howard Lake

markets

ECB Under Fire as Critics of Bond-Buying Plan Reach EU Court

By

Stephanie Bodoni

July 10, 2018, 12:37 PM GMT+2 Updated on July 10, 2018, 4:03 PM GMT+2

https://www.bloomberg.com/news/articles/2018-07-10/ecb-under-fire-as-critics-of-bond-buying-program-reach-eu-court 

• EU judges told bank overstepped its powers in breach of Treaty
• QE tool breaches ECB’s monetary policy mandate, opponents say

Duration Time 2:47

 

ECB's Draghi Addresses EU Parliament: Statement

Mobius: We Are in Uncharted Waters

Critics of the European Central Bank’s quantitative-easing program accused the Frankfurt-based institution of overstepping its powers with “opaque and omnipotent activities” as their fight against the controversial policy reached the European Union’s highest court.
At a packed hearing, the key question the EU Court of Justice must weigh is whether the ECB’s quantitative-easing policy falls within the bank’s mandates defined in the bloc’s law.
Germany’s Federal Constitutional Court last year sought the EU judges’ guidance in a series of challenges to the ECB measure by opponents who, on Tuesday, told the Luxembourg-based court that the tool conflicts with the prohibition of so-called monetary-policy financing.
“The ECB has become a big play-maker in the distortion of competition on the capital markets for sovereign bonds and corporate bonds and has in this way suspended the system of undistorted competition which is mandated in the treaties,” Markus Kerber, a lawyer for some of the claimants, told a 15-judge panel.

OMT Program

The case is reminiscent of a previous challenge when German judges asked the EU’s top court for guidance on a challenge to the ECB’s Outright Monetary Transactions program. The bloc’s court in a binding ruling later cleared the program with minor strings attached and the German tribunal reluctantly followed that direction in its final judgment. Most of the plaintiffs in the QE cases were in the group that sued against the OMT.
Hans-Detlef Horn, a lawyer for another group which consists of five members of the European Parliament, told the EU court that the program “clashes with the prohibition of monetary financing because it puts market participants in a position to buy without risk and de facto as intermediaries of the euro system on the primary market” and “removes the incentive of issuing states to pursue a sound fiscal policy.”
The ECB started the QE program to stimulate the slumping euro-area economy after it had lowered interest rates to close to zero. It’s already announced it will stop making net asset purchases at the end of this year.

‘Grave Reasons’

The German Karlsruhe-based tribunal said in its own decision a year ago that there are “grave reasons to hold that the motions underlying the bond-buying program violate the ban on monetary financing of states and overstep the mandate of the European Central Bank and thus transgress the powers of the member states.”
At odds with its own national court, the German government’s view is that the contested ECB decision and its implementing measures “are currently in any case, still in line with the Treaty,” representative Ulrich Haede, a law professor, told the EU judges.
“With regard to the overall extremely comprehensive communication by the ECB, my government takes the view that the ECB has met its obligation to provide adequate reasoning,” he said.
The ECB, with the backing of the European Commission, has defended its program, saying it’s fully within its mandate.

No Flood

The central bank likened its role to that of lock keeper, where, like for water flowing down a river, it regulates the supply of money for the economy in the euro area.
“Since the beginning of the financial crisis in 2008 the ECB has pulled back the weirs to act in the interest of all” and “now we are seeing how these measures have had the desired effect,” Karen Kaiser, a lawyer for the ECB, said in court. “The economy is growing, unemployment is sinking” and “the floods that some had feared, didn’t come.”
The euro area’s central bank began large-scale asset purchases in March 2015 -- more than six years after the U.S. Federal Reserve started its first program.
Germany’s Bundesbank was outspoken against the measure even before it began, arguing that it reduces incentives for governments to make their economies more competitive.
“Experience shows that independent central banks are best at ensuring price stability and therefore primary law provides for far-reaching independence of the euro system in the performance of its tasks,” Ulrich Soltesz, a lawyer representing the Bundesbank, told the EU court. “Bond purchases by the euro system should remain reserved to exceptional situations and subject to clear restrictions.”
An adviser to the EU court said he would issue a non-binding opinion in the case on Oct. 5. A final ruling could come a few months later.
— With assistance by Chris Elser

(Updates with ECB argument starting in 13th paragraph.)

Monies (old and new) through the lenses of modern accounting

Biagio Bossone, Massimo Costa 25 June 2018
https://voxeu.org/article/monies-old-and-new-through-lenses-modern-accounting
 

A correct application of the general principles of accounting raises fundamental doubts about the current conceptions of money. This column argues that such an application allows the inconsistency whereby cryptocurrencies are not a debt liability if they are issued by private-sector entities, but become so if they are issued by central banks, to be resolved. In both cases, cryptocurrencies actually represent equity capital of the issuing entities, a conclusion that should greatly assist national monetary and financial authorities in shaping regulations. 

Coins circulating as legal tender in national jurisdictions are treated as debt liabilities of the issuing states and are reported as a component of public debt under national accounting statistics (ESA 2010). Similarly, banknotes issued by central banks and central bank reserves are accounted for as central bank debt to their holders. And commercial bank money (demand deposits) are accounted as debt in the financial statements of the issuing banks, while cryptocurrencies are not liabilities of any individuals or institutions if they are created by private entities, but are debt liabilities if they are issued by central banks (CPMI, 2015).
In fact, a correct application of the general principles of accounting raises fundamental doubts about the above conceptions of money. Debt involves an obligation between lender and borrower as contracting parties, but then:

• Which obligation derives for the state from the rights entertained by the holders of coins? 
• Which obligation derives for a central bank from the rights entertained by the holders of banknotes or by the banks holding reserves?
• Which obligations derive for commercial banks on the large share of demand deposits that are never converted into cash or central bank reserves (not even during times of severe financial crisis)?
• And why is it that the same instrument is a debt liability when it is issued by the state, and it is not when it is issued by the private sector?

A correct accounting view of money allows us to address these issues in turn.

State money is not debt

Convertibility into ‘higher’ forms of value (e.g. precious metals or liabilities issued by hegemon countries) has all but disappeared ever since state monies have become so by fiat – convertibility of coins and banknotes into silver or gold, and then into dollars, was suspended long ago, and central banks reserves are unredeemable.¹ Therefore, while these monies are still allocated as debt in public finance statistics and central bank financial statements, they are not debt in the sense of carrying obligations that imply creditor rights.
State money issuances involve transactions whereby money is sold in exchange for other assets (including when they are exchanged against credit claims under lending contracts).The proceeds from money sales represent a form of ‘revenue income’. Under current accounting practices, this income is (incorrectly) unreported in the income statement of the issuing institution and is instead (incorrectly) set aside under debt liabilities.
A correct application of the general accounting principles should instead recognise that state monies may not be considered as debt. The income associated with their issuance, and undistributed, should go into retained earnings and be treated as equity. The assimilation of money to equity requires moving beyond the distinction between equity liabilities and debt liabilities as applied for investigating the nature of financial instruments (Schmidt 2013, PAAinE 2008, PwC 2017).²    
Money accounted as issuer’s equity implies ownership rights. These rights do not give money holders possession over the entity issuing the money (as shares giving investors ownership of a company or residual claims on the company’s net assets). Rather, they consist of claims on shares of national wealth, which money holders may exercise at any time. Those who receive money acquire purchasing power on national wealth, and those issuing money get in exchange a form of gross income that is equal to its nominal value. The income calculated as a difference between the gross revenue from money issuance and the cost of producing money, known as ‘seigniorage’, is appropriated by those who hold (or are granted) the power to issue money.
Two notations are in order, in this regard. First, rents from seigniorage are systematically concealed and seigniorage is not allocated to the income statement (where it naturally belongs), while it is recorded on the liabilities side of the balance sheet, thus originating outright false accounting. Second, ‘primary’ seigniorage should be distinguished from secondary seigniorage, the former consisting of the income generated by the change in the stock of money issued, and the latter consisting of the interest income received on the money that was issued. The state does not receive any secondary seigniorage from coins (they are not lent), while central banks receive both primary and secondary seigniorage from banknotes and reserves but typically account only for secondary seigniorage on banknotes.

Bank deposits are ‘hybrid’ liabilities 

Commercial banks create their own money by issuing liabilities in the form of demand deposits (McLeay et al. 2014). To do so, they do not need to raise deposits from their clients (Werner 2014). Still, they must avail themselves of the cash and reserves necessary to guarantee cash withdrawals from clients and to settle obligations to other banks emanating from client instructions to mobilise deposits to make payments and transfers.
Thus, commercial bank money constitutes a debt liability for deposit-issuing banks, since these are under obligations to convert deposits into cash on demand from their clients and to settle payments in central bank reserves at the time required by payment system settlement rules.However, in a fractional reserve regime banks hold only a fraction of reserves against their total deposit liabilities. Also, the amounts of reserves they actually use for settling interbank obligations are only a fraction of the total transactions settled.The fractional reserve regime and the economies of scale allowed by the payment system and depositor behavior reduce the reserves needed by the banks to back their debts.
More generally, absent adverse economic or market contingencies inducing depositors to convert deposits into cash, the liabilities represented by deposits only partly constitute debt liabilities of the issuing bank, which as such require reserve coverage. The remaining part of the liabilities is a source of income for the issuing bank – income that derives from the bank’s power to create money. In accounting terms, to the extent that this income is undistributed, it is equivalent to equity.
This double nature of demand deposits is stochastic in as much as, at issuance, every deposit unit can be either debt (if, with a certain probability, the issuing bank receives requests for cash conversion or interbank settlement) or equity (with complementary probability).3
The stochastic double nature of bank money is consistent with the principles of general accounting as defined in the Conceptual Framework of Financial Reporting, which sets out the concepts underpinning the International Financial Reporting Standards (IFRS).⁴ In light of these standards, demand deposits are a hybridinstrument – partly debt and partly revenue. The debt part relates to the share of deposits that will (likely) be converted into cash or reserves, while the revenue part relates to the share of deposits that will (likely) never be converted into cash or reserves. This share of deposits is a source of revenue. Once accumulated and undistributed, it becomes equity.
In force of IAS 8, IAS 32 applies for the accounting of this hybrid liability instrument and provides that the debt component must be separated from the equity one.⁵ From such separation derives that, once the debt component is identified, the residual left is the equity component.⁶

Cryptocurrencies are always equity of the issuers 

The correct application of the general accounting principles allows us also to resolve the inconsistency recalled at the outset, whereby cryptocurrencies are not a debt liability if they are issued by private-sector entities, while they become so if they are issued by central banks.
The accounting arguments developed above unambiguously clarify that in both cases cryptocurrencies represent equity capital of the issuing entities.
Such conclusion should greatly assist national monetary and financial authorities in shaping transparent and consistent regulations in the area of cryptocurrencies. 

Important implications

In concluding, a number of critical implications follow from a correct accounting view of money:

• Under current accounting practices, seigniorage is largely underappreciated, it is systematically concealed, and is not allocated to the income statement (where it naturally belongs), while it is recorded on the balance sheet under debt liabilities, thus originating outright false accounting. 
• The application of correct accounting practices should lead to ‘cleaning up’ fiscal budgets and central bank balance sheets from the false practice of considering state monies as ‘debt’.
• If money is accounted as debt, instead of correctly being considered as equity of the issuing entities and wealth for the society using it, it inevitably introduces a deflationary bias in the economy, which deserves analysis.
• Central banks with the power to issue the national currency may ‘create’ their own capital, and they can do so at any time they need to. In other words, to the extent that a central bank retains the power to issue money, it can never find itself in a position of having to request for recapitalisation by the government.  It follows that central bank independence may never be threatened by problems of undercapitalisation (the central bank can always assign itself a quota of nominal national wealth. 
• Owing to double nature of commercial bank money, a relevant share of the deposits that banks report in the balance sheet as ‘debt toward clients’ generates revenues that are very much similar to the seigniorage rent extracted by the state through the issuance of state money (coins, banknotes, and central bank reserves). 
• Much as demand deposits are hybrid instruments, commercial banks are hybrid institutions, too: as issuers of debt-deposits, when they lend money they act as pure intermediaries; as issuer of equity-deposits, they are money creators. Importantly, while the income earned on debt-deposits is from intermediation, income on equity-deposits is seigniorage. 
• Commercial bank seigniorage represents a structural element of subtraction of net real resources from the economy, with potentially deflationary effects on profits and/or wages, distributional consequences, and frictions between capital and labor – all effects that should be studied carefully. 
• It is necessary to identify and estimate the various forms of state and commercial bank seigniorage, the share of seigniorage that is returned to its legitimate “owners” (the citizens), and its effects on economic activity as well as on the economy’s incentive structure and the distribution of national wealth across society.
• Finally, similar considerations hold for cryptocurrencies. They should be treated consistently and be recorded as equity of their issuers, irrespective of the private or public nature of issuers.   

References

Committee on Payments and Market Infrastructures (CPMI) (2015), Digital currencies, Bank for International Settlements, November.

ESA (2010), European System of Accounts, Eurostat, European Commission.   
McLeay, M, A Radia and R. Thomas (2014a), “Money Creation in the Modern Economy”, Bank of England Quarterly Bulletin 54(1): 14-27.

PricewaterhouseCoopers (PwC) (2017), Distinguishing liabilities from equity.

Pro-Active Accounting in Europe (PAAinE) (2008), “Distinguishing between Liabilities and Equity”, Discussion Paper.

Schmidt, M (2013), “Equity and Liabilities – A Discussion of IAS 32 and a Critique of the Classification”, Accounting in Europe 10(2): 201-222.

Werner, R A (2014),“How do banks create money, and why can other firms not do the same? An explanation for the coexistence of lending and deposit-taking”, International Review of Financial Analysis 36: 71–77.

Endnotes

[1] Except where the central bank adheres to fixed exchange rate arrangements, the economy is dollarised, or the country is under a currency board regime.

[2] International Accounting Standard (IAS) 32 defines a ‘financial instrument’ as “a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity”, and an ‘equity instrument’ as “any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities” (par. 11). Under these definitions, legal tender money is neither ‘credit’ for its holders nor ‘debt’ for its issuers. It is instead net wealth of the holder and net worth (equity) of the issuers.

[3] The share of debt-deposits (or equity-deposits as its complement) is a stochastic variable that is influenced by behavioral and institutional factors (for example, cash usage habits or payment system rules) as well as contingent events. For example, in times of market stress, the share of debt-deposits tends to increase, while it tends to be lower when there is strong trust in the economy and the banking system in particular. Policy and structural factors that strengthen such trust (for example, the elasticity with which the central bank provides liquidity to the system when needed or a deposit insurance mechanism) increase the share of equity-deposits. All else being equal, the stochastic share of debt-deposits for a small bank is greater than for a larger bank; vice versa, the larger is the bank, the greater is the share of equity contained in its deposit liabilities.

[4] According to the Framework, “A liability is a present obligation of the entity to transfer an economic resource as a result of past events.” (Section 4.26) and, “Financial reports represent economic phenomena in words and number. To be useful, financial information must not only represent relevant phenomena, but it must also represent the substance of the phenomena that it purports to represent. In many circumstances, the substance of an economic phenomenon and its legal form are the same. If they are not the same, providing information only about the legal form would not faithfully represent the economic phenomenon.” (3 Section 2.12 of the Conceptual Framework)

[5] Specifically, IAS 8 (Sections 10-11) requires that, “In the absence of an IFRS that specifically applies to a transaction, other event or condition, … management shall refer to, and consider the applicability of, the following sources in descending order: (a) the requirements in IFRSs dealing with similar and related issues; and (b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.”

[6] See IAS 32, Sections 28 et.ss. It is noteworthy that, in the case ruled by the quoted standard, the hybrid instrument has the double nature of “liabilities-capital” and not “liabilities-revenue”; however, capital and retained earnings belong to equity. Briefly, equity can be shared into at least two major components: capital and other ownership's contributions, on the one hand, and retained earnings on the other. IAS 32 provides regulation for splitting hybrid instruments between a part attributable to liabilities and a part attributable to equity. Based on the definitions of the Framework, once the component recognizable as debt liability is identified, the residual component is attributed to equity.



Related

• Digitalisation of money and the future of monetary policy
  Peter Bofinger
• Cryptocurrencies’ challenge to central banks
  Antonio Fatás, Beatrice Weder di Mauro
• Making (some) sense of cryptocurrencies
  Antonio Fatás, Beatrice Weder di Mauro
• Competition between government money and cryptocurrencies
  Jesús Fernández-Villaverde

Swiss banks stop cash withdrawals from accounts

News April 27, 2015 11:09

Swiss Pension Fund Manager was Refused to Withdraw Money to Save it from Negative Interest Rates

https://www.ccn.com/swiss-pension-fund-manager-refused-withdraw-money-save-negative-interest-rates/

Switzerland – a land of economic freedom. Or so you thought. A Swiss pension fund manager recently found out otherwise.
Peter Tenebrarum, an independent analyst and economist/social theorist, recently drew attention on his website, acting-man.com, to a situation in Switzerland that has alarmed people who are concerned about economic freedom and the power of central banks.
Tenebrarum’s essay, “The ‘War on Cash’ Migrates to Switzerland,” examines the experience of a Swiss pension fund manager who learned a hard lesson about negative interest rates. The essay has been posted on David Stockman’s “Contra Corner” website, expanding its visibility.

Essay alarms freedom advocates

One reason the situation is especially alarming, Tenebrarum noted, is that Switzerland typically ranks among the top three countries with the most economic freedom.
He says the Swiss National Bank’s policies have led to negative deposit rates at commercial banks. In Switzerland, negative interest rates have become so pronounced that it has become worth it to remove cash from an account earning negative interest and put it into an insured vault.
Since Tenebrarum’s essay posted, personal financial freedom advocates have commented in several forums that the Swiss situation is yet another sign of central bank policies undermining investors.
Many advocates of economic freedom view bitcoin as a liquid asset that allows investors a refuge from the ramifications of central bank policies.
Also read: ECB Announces Negative Interest Rates: Bitcoin Price Rallies

Solution: Move cash to a vault, or use bitcoin

The Swiss pension fund manager determined he would save at least 25,000 CHF per year on every CHF 10 m. deposit by putting the cash into a vault. Hence, he told his bank he planned to make a big withdrawal.

“After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it,” Tenebrarum wrote.

The bank, however, refused to pay out such large sums.
Tenebrarum says the bank is breaking the law, as there is nothing in the Swiss legislation that states that banks are allowed to refuse or delay servicing withdrawals from demand deposits upon request.

“Indeed, although we all know that fractionally-reserved banks literally don’t have the money their customers hold in demand deposits, the contract states clearly that customers may withdraw their funds at any time on demand,” he commented.

Tenebrarum concludes that depositors in Swiss banks have become victims of collectivism. “Collectivism is of course precisely what informs all central planning endeavors,” he says. “Obviously, property rights count for nothing if the central planners can revoke them at the drop of a hat.”
“Consider yourself warned,” Tenebrarum said.

“As the modern day fiat money system inevitably cruises toward its final denouement, individual rights will come increasingly under attack as the world’s ruling elites and centrally directed banking cartels begin to batten down the hatches.”